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Employer Guide: Apprenticeship Levy Key Facts

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Employer Guide: Apprenticeship Levy Key Facts 1 Employer Guide: Apprenticeship Levy Key Facts October 2016 Update The Apprenticeship Levy will be introduced in April 2017. Understand the key facts and how your business can prepare in advance to maximise the opportunity. 1 2 Introduction Contents UK businesses have until April next How does the levy impact your business? 3 year to prepare for the introduction of Paying the levy 6 Why is the levy being introduced? 7 the Apprenticeship Levy. Our guide is How will the levy work?​ 9 designed to help you understand the Key dates 10 key facts so far and how you can begin Will the levy achieve its goals? Our viewpoint​ 11 to prepare in advance. Next steps 13 Support from BPP 14 The Chancellor’s October 2015 Autumn Statement outlined some notable changes to the way apprenticeships in England are funded. These changes are part of the bid to increase the number of apprenticeships to meet pledges made in the Conservative manifesto. In particular, the introduction of a levy on all employers with a UK PAYE in excess of £3 million per annum, regardless of whether they employ apprentices or not, was announced. These payments will be ring-fenced as employer contributions to supplement existing government funding for apprenticeship training. It is expected to raise close to £3 billion annually over the next five years. What exactly is the new levy? Why is it being introduced? What effect will it have on your business and what steps can you take to benefit? 3 How does the new levy impact your business? The levy will put control of apprenticeship funding in the hands of employers and will encourage employers to invest in their apprentices and take on more. Here are the key facts: • From 05 April 2017, employers with a paybill • The levy payment will then be ring-fenced in • Based on proposed funding rules, the levy • Apprenticeships are a devolved policy, which over £3m will be charged a levy of 0.5% of the form of an electronic voucher that can be can be used to fund existing employee means that authorities in each of the UK their paybill. used to purchase training from recognised development as long as they meet the criteria nations manage their own apprenticeship providers, from May 1st 2017 onwards. set out. programmes, including how funding is • “Paybill” will be based on total employee Un-used vouchers will expire after spent on apprenticeship training. The digital earnings subject to Class 1 secondary NICs. • Employers who pay into the levy may find 24 months. apprenticeship service will support the that, over the course of an apprenticeship, the • The 0.5% levy is on your full UK payroll bill, English apprenticeship system. Scotland, • Employers in England who pay the levy and funds in their digital account aren’t enough not just the amount over £3m. Wales and Northern Ireland have their own are committed to apprenticeship training will to cover the full cost of the apprenticeship arrangements for supporting employers to • The levy will be payable through Pay As You be able to get more out than they pay into the training and assessment they would like to access apprenticeships. To calculate how Earn (PAYE) and will be payable alongside levy. The government will apply a 10% top-up buy. When this happens the government will much you will have to spend through the income tax and National Insurance. to monthly funds i.e. all funds entering a levy support and help employers meet 90% of English system, the government plan to use • Payment will be taken monthly, in real time, payer’s account will be increased, so every £1 the additional costs. Employers will be asked data that they already hold about the home meaning as your paybill changes each month, will be increased to £1.10 in value. to make a 10% contribution to the extra cost address of your employees. They’ll use this the levy amount taken will be reflected. of training and to pay this directly to the • All employers with paybills of over £3m will be data to work out what proportion of your pay government or chosen provider, however • HMRC will work closely with employers and required to pay the levy, regardless of whether bill is paid to employees living in England. this will be payable over the lifetime of the providers of payroll services to minimise the they subsequently re-claim voucher funds to They’ll make this assessment in early 2017 assisted apprenticeship. burden of implementing these changes. purchase apprenticeship training. and will announce the exact date in advance. • It is estimated 3-5% of an employers • Although the levy is calculated based on your • Based on proposed funding rules, the levy can workforce will need to be an apprentice to full UK paybill, employers will only be able be claimed back and spent on apprenticeship utilise the levy. to only spend their English proportion on training for all employees at all levels and ages, English apprenticeship training. including graduates who may be eligible for Level 6 or 7 apprenticeship programmes. 5 6 Paying the levy Employer with a UK payroll bill of more than £3m per annum? No Yes 0.5% apprenticeship levy Non-levy paying companies will have access to government funding Plus 10% government top-up for apprenticeships via the SFA once the levy has been launched. Includes £15k government allowance Claim to fund apprenticeship Don’t claim training costs* Employers will receive an additional Employers will receive more funds £1000 payment per learner from Other organisations in their levy pots than they have the government to help meet the claim levy funds to train contributed as a result of the extra costs of employing 16-18 year their apprentices. top-up mechanism. old apprentices. *Minus a % of your levy payment equal to the % of Devolved Nation based employees on your payroll for levy paying employers. 7 8 Why is the levy being introduced? The government’s agenda is to increase apprenticeship starts to three million by 2020 – the levy is the ‘logical Funding the increase Combined with additional reforms solution’ to funding that increase. The levy is being introduced to fund a step Additional reforms are already underway to change in apprenticeship numbers and quality – improve Apprenticeship quality and quantity. delivering on the commitment that there will be Apprenticeships have been given equal legal three million additional apprenticeship starts by treatment to degrees, and from April 2016 Driven by their productivity agenda, the Raising quality 2020. The rate of 0.5% has been set to deliver businesses are no longer required to pay National government is committed to pressing ahead with An Ofsted report into apprenticeships in October the increase in quality that business have been Insurance Contributions for apprentices aged the introduction of more rigorous apprenticeship 2015 stated that the government’s ambition asking for while ensuring it does not place an under 25. Apprenticeship targets of 2.3% of standards (The Trailblazer Initiative). to boost the number of apprenticeships is unreasonable burden on employers. This will headcount have also been set for public sector commendable and has the potential to raise the put the funding of high-quality apprenticeship bodies. The public sector will be able to draw Financing this commitment to a step change profile and position apprenticeships as a direct training on a sustainable footing. Unlike normal down levy funding like any other employer. in the quality and standards of apprenticeship route to greater business productivity. However, taxation, employers can get back the funds that training would have been challenging enough the report concluded, recent growth in numbers are levied by investing in a sufficient amount of by itself. However, it also comes coupled with a has not focused enough on the priorities that apprenticeship training. high-profile Conservative manifesto commitment benefit employers or the economy. to provide three million apprenticeships over the five-year term of government – which if achieved Increasing apprentices aged 16-18 Apprenticeships starts by level (thousands) Intermediate Advanced Higher will be 30% more than was achieved in the Official statistics show that about six in ten previous five years. As Alison Wolf has pointed apprenticeships started since 2009 have 600 out in an environment of static budgets, the sums been at intermediate level 2, with typically 500 just do not add up and employers must accept about a third at advanced level 3 and under that they too must make a larger contribution. 3% at higher level. Ofsted believe, rightly, 400 The Apprenticeship Levy is, she argues, the that there are still far too few 16 - 18 year olds 300 logical solution, and the Chancellor, as confirmed starting an apprenticeship, and that secondary in his Autumn Statement, agrees. schools are still not doing enough to promote 200 apprenticeships to young people. Get more out than you put in 100 At this point, many firms are concerned about 0 the financial implications the levy will have for 3 9 05 07 2 4 their business. However, those who pay in and are /0 /04 /06 /08 /0 /10 /11 02 03 04/ 05 06/ 07 08 09 10 11/1 12/13 13/1 14/15 committed to creating high quality training schemes within their organisation will benefit, and will be able *Data for 14/15 is provisional to claim back more than they contribute. 9 10 How will the Key dates levy work? Levy paying employer 10% Top up Employer views Employs Payments to Unused funds HMRC collect funds in digital apprentice Receives training providers taken expire after levy (PAYE) account to spend and commits for apprentice from digital 24 months in England to training account Employer control and simplicity Autumn By end By April 2016 2016 2017 Training provider Transition Operation Provides info On 25th October the Government released an Information provided • Digital Apprenticeship Commits via ILR to SFA Paid by SFA update regarding the Apprenticeship Levy – about: Service (DAS operational Registered to provide Provides training that training has and balance with SFA apprenticeship to apprentice taken place & that the link to the content can be found here.
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